Academic journal article The European Journal of Comparative Economics

When Is Ordinary Law-Making Tolerated?

Academic journal article The European Journal of Comparative Economics

When Is Ordinary Law-Making Tolerated?

Article excerpt

Abstract

Institutions matter: they affect individual action, influence cooperation, and are crucial in making the difference between wealth and poverty, growth and stagnation. Yet, the explanatory power of modern institutional theorizing has not been exceedingly satisfactory.

In contrast with the mainstream perspective, this paper suggests a theory of institutional dynamics based on the notions of justice, liberty, and tolerance. In particular, we put forward a stylized model of society, within which individuals are characterized by their ideological traits. We discuss under which conditions tensions emerge, and when demand for institutional change builds up. We conclude that today's democracies are inherently stable, and that this stability is explained by the socialist notion of liberty that characterizes the vast majority of the population of a typical modern society.

JEL: A12, A13, A14, B52, D02

Keywords: Legitimacy, tolerance, justice, institutions.

1. From institutions to legal rules

Institutional analysis has always played a key role in political science and sociology. On the one hand, the historical school of political science has depicted institutions as "procedures, routines, norms and conventions embedded in the organizational structure of the polity", the purpose of which is to define authority and contain conflicts (Hall and Taylor, 1996: 938). In this view, institutional resilience and path-dependence are explained by the actions of the coalitions in power, which rationally try to preserve their prerogatives by making change through ordinary law-making difficult; and also by the presence of cultural elements, as a consequence of which institutions are shaped by the individuals' visions of the world, visions that are in turn affected by the context within which individuals operate and develop their beliefs and opinions, particularly about social goals and about the purpose and scope of government (Steinmo, 1992). On the other hand, sociologists maintain that institutions are ultimately the expression of the community's shared beliefs (Berger and Luckmann, 1966). Thus, sociological institutionalism lays considerable emphasis on people's perception of the existing system of laws, government agencies, and procedures, and analyzes the possible tensions between the moral standards of a society and the formal and informal structures in place within that society.

Despite their numerous points of contact, however, the historical and the sociological views have originated two different research agendas. Historical scholars have been trying to assess what kind of shocks interrupt a path-dependent process and how the actors involved react to shocks. By contrast, the sociological context has been discussing the notion of legitimacy, which ensures that the individual recognizes an institution as the source of authority and is ready to comply.

The economics profession has also been aware of the importance of the institutional dimension. As Adam Smith pointed out over two centuries ago, institutions affect individual action, influence cooperation, and are crucial in making the difference between wealth and poverty, growth and stagnation.1 Not surprisingly, therefore, speculation about the role and purpose of the "humanly devised constraints that shape human interaction" (North 1990: 3) has generated a substantial literature.2 From the institutional perspective, however, the real challenge is not about searching, designing, and maintaining the best institutions. Rather, it is about explaining why individuals tolerate and possibly support the institutions they have, even when those institutions have failed to deliver the expected results - say in terms of material wealth or income growth. And it is about investigating what moves them to look for substantial institutional change.

In this paper we abandon the traditional institutional analytical agenda and focus on the last two questions - institutional tolerance and institutional tensions3 - by framing an interdisciplinary approach that draws from the traditions of political-science, sociology, and economics. …

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